**UNITED STATES****SECURITIES AND EXCHANGE COMMISSION******Washington, D.C. 20549****

**FORM 10-QSB/A No. 2**

(Mark One)       [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act       of 1934 For the quarterly period ended March 31, 2005       [ ] Transition report under Section 13 or 15(d) of the Securities Exchange       Act of 1934 For the transition period from _____ to _____

**Commission file number: 000-26095**

| **ENVIROKARE TECH, INC.**                                         |
|-------------------------------------------------------------------|
|                                                                   |
| (Exact name of small business issuer as specified in its charter) |

| **Nevada**               |   | **88-0412549**                       |
|--------------------------|--------|--------------------------------------|
|                          |   |                                      |
| (State of incorporation) |   | (IRS Employer Identification Number) |

| **641 Lexington Avenue, 14th Floor****New York, New York 10022** |
|------------------------------------------------------------------|
|                                                                  |
| (Address of principal executive office)                          |

| **(212) 634-6333**          |
|-----------------------------|
|                             |
| (Issuer's telephone number) |

       APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY       PROCEEDINGS DURING THE PRECEDING FIVE YEARS       Check whether the issuer filed all documents and reports required to be filed by       Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities       under a plan confirmed by a court. Yes [ ] No [ ] NOT APPLICABLE       APPLICABLE ONLY TO CORPORATE ISSUERS       State the number of shares outstanding of each of the issuer's classes of common       equity, as of the latest practicable date: The total number of shares of Common       Stock, par value $.001 per share, outstanding as of March 31, 2005, was       39,056,480.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

----

| **TABLE OF CONTENTS**

**Part I - FINANCIAL INFORMATION**

Item 1. Financial Statements:                       Consolidated Balance Sheets                       Consolidated Statements of Operations                       Consolidated Statements of Cash Flows                       Condensed Notes to the Consolidated Financial Statements               Item 2. Management's Discussion and Analysis or Plan of Operations               Item 3. Control and Procedures

**Part II - OTHER INFORMATION**

Item 1. Legal Proceedings               Item 2. Changes in Securities               Item 3. Defaults Upon Senior Securities               Item 4. Submission of Matters to a Vote of Security Holders               Item 5. Other Information               Item 6. Exhibits and Reports on Form 8-K

**SIGNATURES** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS**

                This document contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.  All statements, other than statements of historical facts, included in or incorporated by reference into this Form 10-QSB which address activities, events or developments which Envirokare Tech Inc., ("Envirokare" or the "Company") expects, believes or anticipates will or may occur in the future are forward-looking statements. The words "believes," "intends," "expects," "anticipates," "projects," "estimates," "predicts" and similar expressions are also intended to identify forward-looking statements.  These forward-looking statements include, among others, statements concerning: expectations, anticipations, beliefs, estimations, projections, and other similar matters that are not historical facts, including such matters as future capital and development expenditures and expansion and growth of business operations.

                These statements are based on certain assumptions and analysis made by the management of Envirokare in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances.

                Envirokare cautions the reader that these forward-looking statements are subject to risks and uncertainties, including those associated with: the financial environment, general economic, market and business conditions, the regulatory environment, business opportunities that may be presented to and pursued by Envirokare, changes in laws or regulations, availability to obtain additional financing on favorable conditions, trend projections, and other factors, many of which are beyond the Company's control that could cause actual events or results to differ materially from those expressed or implied by the statements.  Such risks and uncertainties include those risks and uncertainties identified in the Description of the Business and Management's Discussion and Analysis sections of this document and risk factors discussed from time to time in the Company's filings with the Securities and Exchange Commission.

                Significant factors that could prevent Envirokare from achieving its stated goals include: the inability of Envirokare to obtain financing for capital expenditures and acquisitions, declines or failure to develop in the market for the Company's products, development of superior products by competition, and adverse changes in the regulatory environment affecting the Company.

                The cautionary statements contained or referred to in this document should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by Envirokare or persons acting on its or their behalf.

                Envirokare undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

----

**ITEM 1. FINANCIAL INFORMATION**
| **ENVIROKARE TECH, INC.**                                                                                               |                                  |
|-------------------------------------------------------------------------------------------------------------------------|---------------------------------------|
| (A Development Stage Company)                                                                                           |                                  |
| **CONSOLIDATED BALANCE SHEETS**                                                                                         |                                  |
|                                                                                                                    |                                  |     |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   | ** ****March 31,****2005****(restated) **** ****(unaudited) ** |   |   | ** ****December 31,****2004****(restated) ** |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|  A S S E T S                                                                                                       |                                  |   |   |   |   |   |  |   |
|                                                                                                                    | CURRENT ASSETS                        |   |   |   |   |   |  |   |
|                                                                                                                    |                                  | Cash and cash equivalents |   | $ |               2,574,635 |   | $ |                  432,155 |   |
|                                                                                                                    |                                  | Deposits and retainers  |   |   |                    22,466 |   |   |                    22,466 |   |
|                                                                                                                    |                                  | Employee and related party receivables |   |                      6,127 |   |   |                      1,864 |   |
|                                                                                                                    |                                  | Inventory |   |   |                    43,216 |   |   |                    43,216 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   | TOTAL CURRENT ASSETS |   |   |               2,646,443 |   |   |                  499,700 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
|                                                                                                                    | PROPERTY AND EQUIPMENT                |   |   |   |   |   |  |   |
|                                                                                                                    |                                  | Furniture and fixtures |   |   |                      7,129 |   |   |                      7,129 |   |
|                                                                                                                    |                                  | Equipment  |   |   |                  375,292 |   |   |                    25,292 |   |
|                                                                                                                    |                                  | Molds |   |   |                  170,912 |   |   |                  170,912 |   |
|                                                                                                                    |                                  | Real estate and building |   |   |                  400,000 |   |   |                             - |   |
|                                                                                                                    |                                  |   Less accumulated depreciation |   |   |                  (22,825) |   |   |                  (12,538) |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   | TOTAL PROPERTY AND EQUIPMENT |   |                  930,508 |   |   |                  190,795 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
|                                                                                                                    | OTHER ASSETS                          |   |   |   |   |   |  |   |
|                                                                                                                    |                                  | Patents, net |   |   |               7,453,859 |   |   |                    33,939 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   | TOTAL OTHER ASSETS |   |   |               7,453,859 |   |   |                    33,939 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
|                                                                                                                    |                                  | TOTAL ASSETS |   | $ |             11,030,811 |   | $ |                  724,435 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
| L I A B I L I T I E S   &   S T O C K H O L D E R S '   E Q U I T Y    |                                  |   |   |   |  |   |
|                                                                                                                    | CURRENT LIABILITIES                   |   |   |   |   |   |  |   |
|                                                                                                                    |                                  | Accounts payable |   | $ |                  425,511 |   | $ |                  330,933 |   |
|                                                                                                                    |                                  | Deposits from customers |   |   |                    61,215 |   |   |                    61,215 |   |
|                                                                                                                    |                                  | Deposit owed on exclusivity agreement |   |                             - |   |   |                  280,000 |   |
|                                                                                                                    |                                  | Accrued compensation |   |   |                  114,500 |   |   |                  182,325 |   |
|                                                                                                                    |                                  | Accrued interest  |   |   |                    39,363 |   |   |                    37,835 |   |
|                                                                                                                    |                                  | Accrued interest to stockholders |   |   |                      6,373 |   |   |                      8,936 |   |
|                                                                                                                    |                                  | Capital equipment lease payable, current portion |   |                      7,365 |   |   |                      5,200 |   |
|                                                                                                                    |                                  | Notes payable, current portion |   |   |                      3,026 |   |   |                    64,902 |   |
|                                                                                                                    |                                  | Notes payable to shareholders, current portion |   |                  104,000 |   |   |                  100,197 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   | TOTAL CURRENT LIABILITIES |   |                  761,353 |   |   |               1,071,542 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
|                                                                                                                    | LONG-TERM LIABILITIES                 |   |   |   |   |   |  |   |
|                                                                                                                    |                                  | Capital equipment lease payable, net of current portion |   |                      3,626 |   |   |                      5,791 |   |
|                                                                                                                    |                                  | Notes payable, net of current portion  |   |               5,729,129 |   |   |                    10,499 |   |
|                                                                                                                    |                                  | Notes payable to shareholders, net of current portion |   |               1,456,963 |   |   |               1,476,594 |   |
|                                                                                                                    |                                  |    Discount on notes payable - other |   |                (408,684) |   |   |                (467,588) |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   | TOTAL LONG-TERM LIABILITIES |   |               6,781,034 |   |   |               1,025,296 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
|                                                                                                                    | MINORITY INTEREST IN SUBSIDIARY  |   |               4,995,764 |   |   |                             - |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
|                                                                                                                    | COMMITMENTS AND CONTINGENCIES         |   |                             - |   |   |                             - |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
|                                                                                                                    | STOCKHOLDERS' EQUITY                  |   |   |   |   |   |  |   |
|                                                                                                                    |                                  | Convertible preferred stock, 10,000,000 shares authorized, |   |   |   |   |  |   |
|                                                                                                                    |                                  |   | $0.001 par value; nil shares issued and outstanding |   |                             - |   |   |                             - |   |
|                                                                                                                    |                                  | Common stock, 200,000,000 shares authorized, |   |   |   |   |  |   |
|                                                                                                                    |                                  |   | $0.001 par value; 39,056,480 and 38,943,980 shares |   |   |   |   |  |   |
|                                                                                                                    |                                  |   | issued and outstanding, respectively |   |                    39,056 |   |   |                    38,944 |   |
|                                                                                                                    |                                  | Additional paid-in capital |   |   |               5,950,740 |   |   |               5,895,238 |   |
|                                                                                                                    |                                  | Stock options and warrants |   |   |               4,411,060 |   |   |               3,685,675 |   |
|                                                                                                                    |                                  | Accumulated deficit during development stage |   |           (11,908,195) |   |   |           (10,992,260) |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   | TOTAL STOCKHOLDERS' EQUITY |   |             (1,507,339) |   |   |             (1,372,403) |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |
|                                                                                                                    |                                  | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ |             11,030,811 |   | $ |                  724,435 |   |
|                                                                                                                    |                                  |   |   |   |   |  |   |   |  |   |
|                                                                                                                    |                                  |   |   |   |   |   |   |   |  |   |

F-1

----

| **ENVIROKARE TECH, INC.**                 |
|-------------------------------------------|
| (A Development Stage Company)             |
| **CONSOLIDATED STATEMENTS OF OPERATIONS** |
|                                      |   |   |   |   |   |   |   |   |   |
|                                      |   |   |   |   |  |  |  |  |  |  |  |
|                                      |   |   |   |   |  |  |  |  |  |  | **Period from** |
|                                      |   |   |   |   | **Three Months                 Ended** |  |  | **Three Months                 Ended** |  |  | **June 15,1998** |
|                                      |   |   |   |   |  |  |  | **(inception) to** |
|                                      |   |   |   |   | **March 31,** |  |  | **March 31,** |  |  | **March 31,** |
|                                      |   |   |   |   | **2005** |  |  | **2004** |  |  | **2005** |
|                                      |   |   |   |   | **(restated)** |  |  | **(restated)** |  |  | **(restated)** |
|                                      |   |   |   |   | **(unaudited)** |  |  | **(unaudited** |  |  | **(unaudited)** |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
| REVENUES                                  |   | $ |                                  -   |   | $ |                                  -   |   | $ |                          62,150 |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
| COST OF GOODS SOLD                        |   |   |                                  -   |   |   |                                  -   |   |   |                        (17,500) |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
|                                      | GROSS PROFIT |   |   |                                  -   |   |   |                                  -   |   |   |                          44,650 |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
| E X P E N S E S                           |   |   |   |   |   |   |   |   |   |
|                                      | Consulting fees - related parties |   |   |                        828,292 |   |   |                        100,002 |   |   |                     2,329,220 |
|                                      | Consulting fees - other  |   |   |                                  -   |   |   |                                  -   |   |   |                     1,090,087 |
|                                      | Board of directors fees |   |   |                                  -   |   |   |                                  -   |   |   |                     1,384,590 |
|                                      | Rent |   |   |                          23,649 |   |   |                          23,172 |   |   |                        416,856 |
|                                      | General and administrative |   |   |                          65,698 |   |   |                          52,036 |   |   |                     1,094,345 |
|                                      | Depreciation and amortization |   |   |                          10,287 |   |   |                            1,396 |   |   |                        862,184 |
|                                      | Professional fees |   |   |                        162,261 |   |   |                          62,213 |   |   |                     1,285,360 |
|                                      | Research and development |   |   |                            1,377 |   |   |                            5,059 |   |   |                          91,145 |
|                                      | Wages and salaries |   |   |                          14,488 |   |   |                          21,378 |   |   |                        234,324 |
|                                      | Loss on impairment of asset |   |   |                                  -   |   |   |                                  -   |   |   |                     1,613,603 |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   | TOTAL EXPENSES |   |   |                     1,106,052 |   |   |                        265,256 |   |   |                   10,401,714 |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   |   |   |   |   |   |   |   |   |   |     |
| LOSS FROM OPERATIONS                      |   |   |                   (1,106,052) |   |   |                      (265,256) |   |   |                 (10,357,064) |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSES)                   |   |   |   |   |   |   |   |   |   |
|                                      | Gain on sale of assets |   |   |                                  -   |   |   |                                  -   |   |   |                               577 |
|                                      | Gain on exclusivity agreement |   |   |                        280,000 |   |   |                                  -   |   |   |                        280,000 |
|                                      | Financing costs |   |   |                                  -   |   |   |                                  -   |   |   |                      (633,885) |
|                                      | Interest income (expense) |   |   |                        (94,119) |   |   |                      (122,471) |   |   |                   (1,202,059) |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   | TOTAL OTHER EXPENSE |   |   |                        185,881 |   |   |                      (122,471) |   |   |                   (1,555,367) |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
| LOSS BEFORE INCOME TAXES                  |   |   |                      (920,171) |   |   |                      (387,727) |   |   |                 (11,912,431) |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
| INCOME TAXES                              |   |   |                                  -   |   |   |                                  -   |   |   |                                  -   |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
| MINORITY INTEREST ALLOCATION         |   |   |                            4,236 |   |   |                                  -   |   |   |                            4,236 |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS                                  |   | $ |                      (915,935) |   | $ |                      (387,727) |   | $ |                 (11,908,195) |
|                                      |   |   |   |   |  |   |   |  |   |   |  |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
|                                      | BASIC AND DILUTED NET LOSS  |   |   |   |   |   |   |   |   |   |
|                                      | PER COMMON SHARE |   | $ |                            (0.02) |   | $ |                            (0.01) |   |   |   |
|                                      |   |   |   |   |  |   |   |  |   |   |   |
|                                      |   |   |   |   |   |   |   |   |   |   |   |
|                                      | WEIGHTED AVERAGE NUMBER  |   |   |   |   |   |   |   |   |   |
|                                      | OF BASIC AND DILUTED COMMON |   |   |   |   |   |   |   |   |   |
|                                      | STOCK SHARES OUTSTANDING |   |   |                   38,975,924 |   |   |                   34,021,677 |   |   |   |
|                                           |  |  |  |  |  |  |  |  |  |  |  |
|                                           |  |  |  |  |  |  |  |  |  |  |  |
|                                           |  |  |  |  |  |  |  |  |  |  |  |

F-2

----

| **ENVIROKARE TECH, INC.**                                                                        |                                          |
|--------------------------------------------------------------------------------------------------|-----------------------------------------------|
| (A Development Stage Company)                                                                    |                                          |
| **CONSOLIDATED STATEMENTS OF CASH  FLOWS**                                                  |                                          |
|                                                                                             |                                          |
|                                                                                             |                                          |   | **Three Months Ended ** |   |   | **Period from                 June 15,1998                 (Inception)                 to March 31,2005                  (restated)                  (unaudited)** |   |
|                                                                                                  |                                          |   |
| **March 31, 2005                   (restated)                  (unaudited)** |                                          |   | **March 31, 2004                   (restated)                  (unaudited** |   |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                            |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                             | Net loss                                      |   |   |   | $ |                     (915,935) |   | $ |                     (328,823) |   | $ |                   (8,790,045) |   |
|                                                                                             | Loss allocated to minority interest           |   |   |                         (4,236) |   |   |                                -   |   |   |                          (4,236) |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          |   |   |   |   |   |   |                     (920,171) |   |   |                     (328,823) |   |   |                   (8,794,281) |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             | Adjustments to reconcile net loss to          |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   net cash used by operating activities: |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |                                          | Depreciation and amortization |   |     |                         10,287 |   |   |                           1,396 |   |   |                          25,787 |   |
|                                                                                             |                                          | Intangible asset expensed |   |     |                                -   |   |   |                                -   |   |   |                            9,520 |   |
|                                                                                             |                                          | Impairment of molds |   |   |                                -   |   |   |                                -   |   |   |                          27,000 |   |
|                                                                                             |                                          | Gain on sale of assets |   |   |                                -   |   |   |                                -   |   |   |                             (577) |   |
|                                                                                             |                                          | Stock options issued for consulting fees |   |     |                       741,000 |   |   |                                -   |   |   |                     2,159,987 |   |
|                                                                                             |                                          | Stock options issued for directors fees |   |   |                                -   |   |   |                                -   |   |   |                        854,779 |   |
|                                                                                             |                                          | Common stock issued for consulting fees |   |     |                                -   |   |   |                                -   |   |   |                        169,094 |   |
|                                                                                             |                                          | Common stock issued for payment of expenses |   |   |                                -   |   |   |                                -   |   |   |                        134,000 |   |
|                                                                                             |                                          | Warrants issued for financing expenses |   |     |                                -   |   |   |                                -   |   |   |                        469,290 |   |
|                                                                                             |                                          | Warrant term extension granted for accrued compensation |   |   |                                -   |   |   |                                -   |   |   |                          24,000 |   |
|                                                                                             |                                          | Interest paid with refinance of debt |   |   |                                -   |   |   |                                -   |   |   |                        350,890 |   |
|                                                                                             | Changes in assets and liabilities:            |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |                                          | Customer deposits |   |   |                                -   |   |   |                                -   |   |   |                          61,215 |   |
|                                                                                             |                                          | Inventory |   |   |   |                                -   |   |   |                                -   |   |   |                        (43,216) |   |
|                                                                                             |                                          | Employee and related party receivables  |   |   |                         (4,263) |   |   |                                -   |   |   |                          (6,127) |   |
|                                                                                             |                                          | Prepaid expenses |   |   |                                -   |   |   |                         (2,789) |   |   |                                 -   |   |
|                                                                                             |                                          | Accounts payable |   |     |                         94,580 |   |   |                         90,247 |   |   |                        425,513 |   |
|                                                                                             |                                          | Accrued compensation |   |   |                       (67,825) |   |   |                                -   |   |   |                        114,500 |   |
|                                                                                             |                                          | Accrued interest payable  |   |   |                         (1,035) |   |   |                           2,567 |   |   |                          60,489 |   |
|                                                                                             |                                          | Discount on debt |   |   |                         58,904 |   |   |                                -   |   |   |                          58,904 |   |
|                                                                                             |                                          | Deposit owed on exclusivity agreement |   |   |                     (280,000) |   |   |                                -   |   |   |                                 -   |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          | Net cash used by operating activities |   |   |                     (368,523) |   |   |                                -   |   |   |                   (3,899,233) |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                            |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                             |                                          | Deposits and retainers |   |   |                                -   |   |   |                                -   |   |   |                        (22,465) |   |
|                                                                                             |                                          | Purchase of molds |   |   |                                -   |   |   |                                -   |   |   |                      (197,912) |   |
|                                                                                             |                                          | Payments on license agreement |   |   |                                -   |   |   |                                -   |   |   |                      (525,000) |   |
|                                                                                             |                                          | Patent costs |   |   |                       (12,715) |   |   |                                -   |   |   |                        (22,844) |   |
|                                                                                             |                                          | Purchase of equipment |   |   |                                -   |   |   |                                -   |   |   |                        (17,268) |   |
|                                                                                             |                                          | Proceeds from sale of equipment |   |   |                                -   |   |   |                                -   |   |   |                            1,275 |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          | Net cash used in investing activities |   |   |                       (12,715) |   |   |                                -   |   |   |                      (784,214) |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                            |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                             |                                          | Payment of capital equipment lease |   |   |                                -   |   |   |                            (884) |   |   |                          (4,604) |   |
|                                                                                             |                                          | Payment of notes payable |   |   |                       (16,282) |   |   |                       (21,004) |   |   |                      (118,071) |   |
|                                                                                             |                                          | Proceeds from sale of preferred stock |   |   |                                -   |   |   |                                -   |   |   |                        250,000 |   |
|                                                                                             |                                          | Proceeds from sale of common stock  |   |   |                         40,000 |   |   |                       279,350 |   |   |                     3,181,797 |   |
|                                                                                             |                                          | Proceeds from sale of warrant term extension |   |   |                                -   |   |   |                                -   |   |   |                        102,825 |   |
|                                                                                             |                                          | Repurchase of common stock |   |   |                                -   |   |   |                                -   |   |   |                          (7,500) |   |
|                                                                                             |                                          | Proceeds from notes payable, related parties |   |   |                                -   |   |   |                                -   |   |   |                     1,353,635 |   |
|                                                                                             |                                          | Proceeds from minority interest capital contribution |   |   |                    5,000,000 |   |   |   |   |   |                     5,000,000 |   |
|                                                                                             |                                          | Payment on acquisition agreement  |   |   |                  (2,500,000) |   |   |                                -   |   |   |                   (2,500,000) |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          | Net cash provided by financing activities |   |   |                    2,523,718 |   |   |                       257,462 |   |   |                     7,258,082 |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net increase in cash                                                                             |                                          |   |                    2,142,480 |   |   |                       257,462 |   |   |                     2,574,635 |   |
|                                                                                             |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                                   |                                          |   |                       432,155 |   |   |                         65,810 |   |   |                                 -   |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents, end of period                                                         |                                          | $ |                    2,574,635 |   | $ |                       323,272 |   | $ |                     2,574,635 |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL CASH FLOW INFORMATION:                                                              |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                             |                                          | Interest paid |   | $ |                         32,760 |   | $ |                         60,376 |   | $ |                          87,095 |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          | Income taxes paid |   | $ |                                -   |   | $ |                                -   |   | $ |                                 -   |   |
|                                                                                             |                                          |   |   |   |   |   |   |  |   |   |  |   |   |  |   |
|                                                                                             |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NON-CASH TRANSACTIONS:                                                                           |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                             |                                          | Common stock issued for acquisition of subsidiary |   | $ |                                -   |   | $ |                                -   |   | $ |                     1,925,000 |   |
|                                                                                             |                                          | Note issued for purchase of property, equipment, |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |                                          |   |  and operating expenses |   | $ |                                -   |   | $ |                                -   |   | $ |                            3,635 |   |
|                                                                                             |                                          | Note issued for pending patent to related party |   | $ |                                -   |   | $ |                                -   |   | $ |                          33,330 |   |
|                                                                                             |                                          | Note issued for deposit for stock |   | $ |                                -   |   | $ |                                -   |   | $ |                        100,000 |   |
|                                                                                             |                                          | Warrants issued for financing expenses |   | $ |                                -   |   | $ |                                -   |   | $ |                        469,290 |   |
|                                                                                             |                                          | Impairment of intangible asset |   | $ |                                -   |   | $ |                                -   |   | $ |                     1,613,603 |   |
|                                                                                             |                                          | Warrants issued for financing (restated) |   | $ |                                -   |   | $ |                                -   |   | $ |                          44,650 |   |
|                                                                                             |                                          | Stock options issued for consulting fees |   | $ |                                -   |   | $ |                                -   |   | $ |                     1,418,987 |   |
|                                                                                             |                                          | Stock options issued for directors fees |   | $ |                                -   |   | $ |                                -   |   | $ |                        854,779 |   |
|                                                                                             |                                          | Common stock issued for consulting fees |   | $ |                                -   |   | $ |                                -   |   | $ |                        169,094 |   |
|                                                                                             |                                          | Common stock issued for payment of expenses |   | $ |                                -   |   | $ |                                -   |   | $ |                        134,000 |   |
|                                                                                             |                                          | Warrant term extension granted for accrued compensation |   | $ |                                -   |   | $ |                                -   |   | $ |                          24,000 |   |
|                                                                                             |                                          | Interest paid with refinance of debt |   | $ |                                -   |   | $ |                                -   |   | $ |                        350,890 |   |
|                                                                                             |                                          | Stockholder's contribution for equipment  |   | $ |                                -   |   | $ |                                -   |   | $ |                            1,847 |   |
|                                                                                             |                                          | Equipment acquired via capital lease |   | $ |                                -   |   | $ |                                -   |   | $ |                          15,595 |   |
|                                                                                             |                                          | Stock options issued for consulting fees |   | $ |                       741,000 |   | $ |                                -   |   | $ |                        741,000 |   |
|                                                                                             |                                          | Debt incurred in acquisition of subsidiary's property |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |                                          |   | and patents |   | $ |                    8,157,208 |   | $ |                                -   |   | $ |                     8,157,208 |   |

F-3

----

****ENVIROKARE TECH, INC.** (A Development Stage Company)**CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      MARCH 31, 2005****

**NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS**

Envirokare Tech, Inc. (hereinafter, "the Company" or "Envirokare") was incorporated in June 1998 under the laws of the State of Nevada.  In December 1998, the Company acquired assets of a business engaged in developing a rubber mold technology and patent rights potentially applicable to future development of a pallet made of recycled materials.  The Company believes the early-stage rubber mold technology to be of marginal commercial value.

During 2001, the Company acquired the licensing rights to a proprietary thermoplastic processing technology, the TPF Thermoplastic FlowformingTM process.  The licensing agreement provides the Company with the ability to utilize the TPF Thermoplastic Flowforming technology to design, develop, manufacture, market, license and sublicense a wide range of large structural parts, including the Company's proprietary pallet.  The pallet is now composed of long-fiber reinforced thermoplastic composite and will be manufactured using the acquired TPF Thermoplastic Flowforming technology.

In March 2005, the Company acquired the assets of Thermoplastic Composite Designs, Inc. (hereinafter "TCD").  These assets were subsequently contributed to LRM Industries, LLC, a joint venture with Nova Chemicals, Inc. (hereinafter "Nova"), to commercialize the Company's TPF Thermoplastic Flowforming technology.  The joint venture is being accounted for as a majority control subsidiary, with Nova's interest treated as a minority interest.  See Note 10.

The Company's current operating strategy is based on developing products to be manufactured by the TPF Thermoplastic Flowforming process, as well as marketing the process technology to potential sublicensees.  The Company maintains offices in Orlando, Florida. The Company has elected a fiscal year-end of December 31.

The Company's consolidated financial statements include the following entities:  Electroship Acquisition Corporation, Envirokare Composite Corp., Thermoplastic Composite Designs, Inc., and LRM Industries, LLC.

**NOTE 2 - BASIS OF PRESENTATION**

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B as promulgated by the Securities and Exchange Commission ("SEC").  Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements.  These unaudited interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2004.  In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period.  Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company's financial position and results of operations.

Operating results for the three month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of operations. 

As shown in the accompanying financial statements, the Company has incurred an accumulated deficit of $11,908,195 through March 31, 2005, and has had no revenues.  These factors raise substantial doubt about the Company's ability to continue as a going concern.   The Company's financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

**NOTE 3 - PROPERTY AND EQUIPMENT**

Property and equipment are stated at cost.  Depreciation is provided using the straight line method over the estimated useful lives of the assets, which range from three to seven years.  Molds will be depreciated over their estimated useful lives once placed in service.  During the quarter ended June 30, 2005, the Company deemed that pallet molds valued at $43,000 were of no commercial value and expensed the value of these molds. Additionally, during the quarter ended September 30, 2005, the Company expensed the value of a top cap and pallet mold valued at $112,912.  None of the molds expensed in the quarter ended June 30, 2005, or the molds previously deemed to be of no commercial value, are carried in valuations of the Company's assets.  The costs included in molds as of June 30, and September 30, 2005 are comprised of design, machining, manufacturing and delivery and relate to the Beam mold and are valued at $16,000.  This mold is being depreciated over a five year period.

Depreciation expense for the three months ended March 31, 2005 and 2004 was $10,287 and $1,396, respectively.

The following is a summary of the Company's property and equipment and related accumulated depreciation:
|                                 |   | March 31,                                                                                                                |   |   | December 31,                                                                                                                                                   |
|--------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |   | 2005                                                                                                                     |   |   | 2004                                                                                                                                                           |
|                                 |   |                                                                                                                          |   |   |                                                                                                                                                                |
| Furniture and fixtures               | $      |                     7,129 |   | $      |                     7,129                                       |
| Equipment                            |   |                 375,292                       |   |   |                   25,292                                                  |
| Molds                                |   |                 170,912                       |   |   |                 170,912                                                             |
| Buildings                            |   |                   50,000            |   |   |                            - |
| Land                                 |   |                 350,000                       |   |   |                            - |
|                                 |   |                                                                                                                          |   |   |                                                                                                                                                                |
|                                 |   |                 953,333                       |   |   |                 203,333                                                             |
| Less:  Accumulated depreciation |   |                 (22,825)                      |   |   |                 (12,538)                                                            |
|                                 |   |                                                                                                                          |   |   |                                                                                                                                                                |
|                                 | $      |                 930,508                       |   | $      |                 190,795                                                             |
|                                 |   |                                                                                                                          |   |   |                                                                                                                                                                |

**NOTE 4 - INTANGIBLE ASSETS**

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (hereinafter "SFAS No. 141") and Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" (hereinafter "SFAS No. 142"). SFAS No. 141 provides for the elimination of the pooling-of-interest method of accounting for business combinations with an acquisition date of July 1, 2001 or later. SFAS No. 142 prohibits the amortization of goodwill and other intangible assets with indefinite lives and requires periodic reassessment of the underlying value of such assets for impairment. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001.  The Company adopted SFAS No. 142. Application of the nonamortization provision of SFAS No. 142 is expected to result in no change to the Company's reported results of operations.

Intangible assets are tested for impairment on an annual basis. At December 31, 2003, the Company has impaired the carrying value of its intangible assets, as more fully described below.

License Agreement

In March 2001, the Company obtained the rights to its TPF Thermoplastic Flowforming process in exchange for cash consideration of $525,000.  The licensing agreement provides the Company with the ability to utilize the TPF Thermoplastic Flowforming technology to design, develop, manufacture, market, license and sublicense a wide range of large structural parts, including the Company's proprietary pallet.  The license agreement expired in 2003.

During 2003, the Company agreed to extend the license agreement term to March 10, 2005.  No additional consideration was required for the term extension.  During 2005 the Company determined that an appropriate accounting treatment related to the license agreement would have been to amortize the value of the license agreement over its initial term.  Accordingly, the Company has amended its financial statements for the periods ended December 31, 2001, 2002 and 2003 to reflect the full amortization of the license value.  This amortization increased the Company's accumulated deficit for 2001 and 2002 by $157,500 and $210,000, respectively. 

Accumulated amortization for the years ended December 31, 2001 and 2002 is $157,500 and $367,500, respectively.

Patent Acquisition Costs and Technology Rights

On December 1, 2000, the Company acquired technology rights in exchange for common stock shares in the Company, through its wholly-owned subsidiary, Electroship Acquisition Corp.  The acquired technology rights relate to an application stage patent for an invention that is expected to facilitate shipping commerce and/or for processing information regarding shipping services in a network environment.  This acquisition was valued using the trading price of the Company's common stock at the date of acquisition.  The Company amended its financial statements for the years ended December 31, 2001 and 2002 to provide for amortization of the Electroship patent.  The effects of the amortization for the prior years ended resulted in an increased charge to amortization in the amount of $113,235 in each year ended.  The effect of the amortization also increased the accumulated deficit in the amount of $113,235 in each of the years ended.  The Company also recorded amortization for the Electroship patent in the amount of $28,309 for each of the quarters ended March 31, June 30 and September 30, 2003, which amortization increased the charge to amortization for the respective periods.

The Company has amended its financial statements for the years ended December 31, 2001, 2002, and 2003 to provide for amortization of this patent.  The effects of the amortization for the respective year's results in an increased charge to amortization expense in the amount of $113,235 for 2001 and 2002 and $84,926 for the year ended 2003.  This amortization increased the Company's accumulated deficit for the years ended December 31, 2001 and 2002 by $113,235 and the year ended December 31, 2003 in the amount of $84,926, respectively.

Accumulated amortization for the years ended December 31, 2001, 2002 and 2003 is $113,235, $226,470 and $311,396, respectively.

Subsequent to amending the financial statements for the years ended December 31, 2001 and 2002, and the quarters ended March 31, June 30 and September 30, 2003, the Company determined that the value of the Electroship patent is impaired.  The Company believes that the impairment is primarily a result of the Company's inability to dedicate appropriate resources to develop and market the potential opportunities contained within the patent filing and also the inability of the Company to make a reasonable determination of cash flows and associated patent life, for the pending patent.  The Company has recognized a reduction in the remaining intangible asset value of $1,613,603.  The effect of this impairment created a charge to earnings during the fiscal year ended December 31, 2003 and is also recognized as an increase in the Company's accumulated deficit in subsequent reporting periods.

In March 2005, the Company acquired the assets of Thermoplastic Composite Designs, Inc., which included patents and other intellectual property.  See Note 10.

**NOTE 5 - NOTES PAYABLE TO SHAREHOLDERS**

During the year ended December 31, 2003, the Company entered into a promissory note arrangement with two Company shareholders, in the principal amount of $100,000.  The note bears an interest rate of 15% per annum with principal and interest payment payable in 36 equal monthly installments of $3,467 commencing September 1, 2003.  Three common stock warrants are attached to each dollar of debt, with an exercise price of $0.20 per share, with each warrant being valued at $0.11 per share.  These warrants are fully exercisable for up to three years from the dates of issuance.  The Company used the assumptions of a 4% interest rate, volatility of 69% and a three-year period to calculate the warrant value.   The calculated fair value of the warrants, in the amount of $32,810, has been recorded as a discount on the debt issued and is being amortized over the life of the debt.  During the years ended December 31 2003 and 2004, the Company has amortized this discount on debt, in the amounts of $3,646 and $10,938, respectively.  The accumulated amortization for the respective years is $3,646 and $14,584.  During the quarter ended March 31, 2005, the Company has amortized this discount on debt in an amount of $2,734.  The accumulated amortization for the discount on debt relating to this promissory note is $17,318. The amortization previously described is reflected in the financial statements as a charge to interest for the respective periods.  See Note 7.

During the year ended December 31, 2003, the Company entered into a promissory note with a director and shareholder, in the principal amount of $200,000.  The note bears an interest rate of 15% per annum, with principal and interest payment payable in 36 equal monthly installments of $6,933, commencing January 1, 2003.  Three common stock warrants are attached to each dollar of debt, with an exercise price of $0.20 per share, with each warrant being valued at $0.13 per share.  These warrants are fully exercisable for up to three years.  The Company used the assumptions of a 4% interest rate, volatility of 69% and a three-year period to calculate the warrant value.  The calculated fair value of the warrants, in the amount of $78,000, has been recorded as a discount on the debt issued and is being amortized over the life of the debt.  During the year ended December 31 2004, the Company has amortized this discount on debt, in an amount of $26,000.  This amortized amount increased accumulated amortization for the year ended December 31, 2004 in the amount of $26,000.  During the quarter ended March 31, 2005, the Company has amortized this discount on debt in an amount of $6,500.  The accumulated amortization for the discount on debt relating to this promissory note is $32,500. The amortization previously described is reflected in the financial statements as a charge to interest for the respective periods.  See Note 7.

In December 2003, with the exception of the notes discussed in the two paragraphs above, the Company rolled all of its remaining outstanding notes payable and accrued interest to related parties into new notes.  These notes bear an interest rate of 12% per annum, with interest payments made in equal monthly installments of varying amounts, commencing on January 1, 2004.  Common stock warrants to purchase up to an aggregate of 5,125,000 shares of Company common stock were attached to these loans, with an exercise price of $0.24 per share.  The Company calculated a fair value for these warrants, in the amount of $138,888.  The Company used the assumptions of a 4% interest rate, volatility of .69% and a three-year term to calculate the warrant value.  Subsequent to reporting the original transaction as previously described, the Company discovered a defect in the assumptions utilized to calculate the fair value of the newly issued and extended warrants.  The revised assumptions utilized to calculate the warrant value are a 4% interest rate, volatility of 69% and a three-year term.  The restated warrant valuation of $596,038 has been recorded as a discount on the debt issued and is being amortized over the life of the debt.  During the year ended December 31 2004, the Company has amortized this discount on debt, in an amount of $198,679.  During the quarter ended March 31, 2005, the Company has amortized this discount on debt, in an amount of $49,670. For the period ended March 31, 2005, this amortized amount increased accumulated amortization pertaining to this promissory note to $248,349.  The amortization previously described is reflected in the financial statements as a charge to interest for the respective periods.  See Note 7.

During 2001, $1,025,000 was raised in a private debt offering.  Three warrants were attached to each dollar of debt, with an exercise price of $0.195 per share.  These warrants were fully exercisable for up to two years from the dates of issuance.  These warrants were valued at $0.07 per share, for a total of $219,642, using the valuation assumptions of 4% interest and a volatility of 91.25%. 

The warrant value was treated as a finance expense and immediately charged to earnings for the year ended December 31, 2001.  The Company has subsequently determined that the warrant value should have been more appropriately recorded as a discount on the related debt and amortized over the two year life of the debt.  Accordingly, interest expense has been recognized in the amount of $109,821, for the year ended December 31, 2002.  The change in accounting treatment as previously described, required the Company to amend and restate its financial statements for the years ended December 31, 2001, 2002 and 2003, to reflect the amortization of the discount on debt.  See Note 7.

The affect of this restatement reduced the Company's 2001 accumulated deficit and loss per share by $219,642 and $0.01, respectively.  For the year ended December 31, 2002, accumulated deficit and loss per share increased $109,821 and $0.004, respectively.

**NOTE 6 - COMMON STOCK**

During the three months ended March 31, 2005, the Company issued 62,500 shares of its common stock when warrants were exercised at $0.40 per share for a total of $25,000.  In addition, 50,000 shares were issued when stock options were exercised at $0.30 per share for a total of $15,000. 

**NOTE 7 - STOCK OPTIONS AND WARRANTS**

Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (hereinafter "SFAS No. 123"), defines a fair value-based method of accounting for stock options and other equity instruments.  The Company has adopted this method, which measures compensation costs based on the estimated fair value of the award and recognizes that cost over the service period. In accordance with SFAS No. 123, the fair value of stock options and warrants granted are estimated using the Black-Scholes Option Price Calculation.  The following assumptions were made to value the stock options and warrants for the year ended December 31, 2004: risk-free interest rate of 4%, volatility of 53%, and terms of three to nine years.  The following assumptions were made to value the stock options and warrants for the year ended December 31, 2003: risk-free interest rate of 4%, volatility of 69% and 91%, and terms of one to ten years. 

Stock Options

In September 1999, the board of directors of the Company adopted the Envirokare Tech, Inc. 1999 Stock Option Plan (the "Plan") for the purpose of attracting, retaining and motivating employees, directors and consultants of the Company.  The shareholders approved the Plan at their annual meeting in May 2000.  As adopted, the Plan provides for authorization of 2,000,000 ****shares of common stock for issuance pursuant to awards under the Plan.  In September 1999, the board of directors had approved the granting of non-qualified options under the Plan to purchase an aggregate 1,150,000 shares of common stock.  In June 2000, the board of directors voted to adjust the number of shares of common stock authorized for issuance under the Plan from 2,000,000 to 4,000,000, pursuant to the anti-dilution provisions of the Plan, to reflect the 2-for-1 split of the Company's common stock effected in March 2000.  The board of directors also voted to make corresponding adjustments to the number of shares subject to previous option grants and to the exercise prices for such options.

All of the options granted by the Company are exercisable upon issuance.  The Plan restricts sales for shares received upon exercise of non-qualified options, limiting each optionee to sales in any year of option shares equal to 25% of the total number of shares received under the optionee's grant.  The Plan requires early exercising of the stock options for various reasons, including employment termination, separation from services, and cancellation or completion of consulting contracts. 

The Company filed a Form S-8 under the Securities Act with the Securities and Exchange Commission in March 2000 to register 1,150,000 shares (2,300,000 as adjusted for the stock split) of common stock authorized for issuance under the Plan.  In September 2000, the Company filed Post-Effective Amendment No. 1 to the Form S-8, to register the remaining 1,700,000 shares under the Securities Act. 

Summarized information about stock options outstanding and exercisable at March 31, 2005 is as follows:
|   | Options Outstanding |   | Options Exercisable            |
|--------|---------------------|--------|--------------------------------|
|   |                     |   |                                |
|   | Exercise Price      |   | Number             Outstanding |   | Weighted Average             Remaining Contractual             Life (Years) |   | Weighted             Average             Exercise Price |   | Number              Exercisable |   | Weighted             Average             Exercise Price |
|   |                     |   |                                |   |  |   |  |   |  |   |  |
| $      | 0.                  | 23     |                                | 7,775,000 |  | 7.60 | $ | 0. | 23 |  | 7,775,000 | $ | 0. | 23 |
|   | 0.                  | 30     |                                | 50,000 |  | 4.50 |  | 0. | 30 |  | 50,000 |  | 0. | 30 |
|   | 0.                  | 40     |                                | 250,000 |  | 4.50 |  | 0. | 40 |  | 250,000 |  | 0. | 40 |
|   | 0.                  | 575    |                                | 250,000 |  | 4.50 |  | 0. | 575 |  | 250,000 |  | 0. | 575 |
|   | 0.                  | 94     |                                | 1,300,000 |  | 2.90 |  | 0. | 94 |  | 1,300,000 |  | 0. | 94 |
|   |                     |        |                                |  |  |  |  |  |  |  |  |
| $      | 0.23 - 0.575        |        | 9,625,000                      |  | 6.77 | $ | 0. | 34 |  | 9,625,000 | $ | 0. | 25 |
|   |                     |   |                                |   |  |   |  |   |  |   |  |
|        |                     |        |                                |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | Equity Compensation Plans             Approved by Shareholders |   | Shares Issuable Upon             Exercise of Outstanding Options |   | Weighted Average             Exercise Price |   | Shares Available             for Issuance |   |
|--------|----------------------------------------------------------------|--------|------------------------------------------------------------------|--------|---------------------------------------------|--------|-------------------------------------------|--------|
|   |                                                                |   |                                                                  |   |                                             |   |                                           |   |
|   | 1999 Equity Incentive Plan                                     |   |  550,000                                                    |   | $0.47                                       |   |  3,300,000                           |   |
|   |                                                                |   |                                                                  |   |                                             |   |                                           |   |
|        |                                                                |        |                                                                  |        |                                             |        |                                           |        |  |  |  |  |  |  |  |  |  |  |  |

 

Common Stock Options

Options issued, year to date, by the Company total 9,625,000 and include the number of shares under options outstanding of 1,300,000 shares issued to LRM employees and consultants, at a strike price of $0.94 per share and a three year exercise period with immediate vesting of the option grants.  Additionally, the Company issued 8,830,000 shares issued to the Company's management team and consultants, at a strike price of $0.965 per share and a ten year exercise period, effective June 2005.  These options are recorded and tabulated in the Company's amended financial report for the period ended June 30, 2005.  In connection with the 1,300,000 options issued to LRM employees and consultants, these options were issued as a part of their respective employment and consulting agreements to retain their services for the newly created joint venture entity, LRM Industries, and the fair value ascribed to the option grants is $741,000, which amount has been recorded as a compensation expense at the time of the grants.  See Note 10.

Following is a summary of the Company's stock option activity during the three months ending March 31, 2005:
|                                     |  Shares                                                                                                                                 |   |   |  Weighted Average             Exercise Price                                                                                                              |
|------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                                              |   |   |                                                                                                                                                                |
| Options outstanding at December 31, 2004 |          8,375,000                                                                                   |   | $      |                       0.25                            |
| Granted                                  |           1,300,000                                                                             |   |   |                       0.94                            |
| Canceled                                 |                         - |   |   |                          -   |
| Exercised                                |              (50,000)                                                            |   |   |                       0.30                            |
|                                     |                                                                                                                                              |   |   |                                                                                                                                                                |
| Options outstanding at March 31, 2005    |           9,625,000                                                                             |   | $      |                       0.34                            |
|                                     |                                                                                                                                              |   |   |                                                                                                                                                                |

The weighted average fair market value of stock options granted for the years ended December 31, 2004 and 2003 was $0.28 and $0.26, respectively. 

During 2004, the Company granted options to purchase 2,750,000 shares of common stock in consideration for directors' fees valued at $487,090.  Additionally, the Company granted options to purchase 287,500 shares of common stock in consideration for consulting services valued at $57,094.  Also during 2004, 100,000 options expired. 

During 2003, the Company granted options to purchase 1,787,500 shares of common stock to members of the board of directors, valued at $367,689.  In addition, the Company granted 2,700,000 options to related party consultants, valued at $529,811. 

The Company discovered an error in not recognizing certain stock options granted in 2003.  As a result of correcting this error in the Company's balances and presentation, the Company has incurred an additional charge against earnings, in the amount of $44,650, arising from the expense calculated on the fair value of the options issued to purchase up to 250,000 common stock shares at a purchase price of $0.23 per share.  The assumptions used to calculate the value of the options were a risk-free interest rate of 4%, volatility of 69%, with an exercise period of ten years.

During 2002, the Company issued 350,000 stock options valued at $52,173, and 2,300,000 stock options expired, which were valued at $476,000. 

During 2001, the Company issued 1,000,000 stock options valued at $164,000, and 550,000 stock options expired, which were valued at $132,000.

Summarized information about common stock warrants outstanding and exercisable at March 31, 2005 is as follows:
|                       |   |  Common Shares             Under Warrants                        |   | Exercise Price             Per Share |   | Weighted Average             Fair Value             Per Share             At Grant Date |   | Expiration Date |
|----------------------------|--------|-----------------------------------------------------------------------|--------|--------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|-----------------|
|                       |   |                                                                       |   |                                      |   |                                                                                         |   |                 |
| Balance, December 31, 2004 |   |       20,990,000                             |   | $0.20 - $0.75                        |   | $0.20                                                                                   |   | 2/05 - 9/14     |
|                       |   |                                                                  |   |                                 |   |                                                                                    |   |            |
| Exercise of warrants       |   |            (62,500) |   | $0.40                                |   | $0.25                                                                                   |   | 2/06            |
|                       |   |                                                                  |   |                                 |   |                                                                                    |   |            |
| Expiration of warrants     |   |            (20,000) |   | $0.75                                |   | $0.23                                                                                   |   | 2/05            |
|                       |   |                                                                       |   |                                 |   |                                                                                    |   |            |
| Balance, March 31, 2005    |   |       20,907,500                             |   |                                 |   |                                                                                    |   |            |
|                       |   |                                                                       |   |                                 |   |                                                                                    |   |            |

During the year ended December 31, 2004, the Company issued 7,428,750 warrants valued at $376,598, less issuance costs of $122,118.  In October of 2004, the Company issued an extension offer to existing holders of the Company's warrants that expired after January 1, 2004.  The extension offer, provided at a price of $0.02 per warrant, increased the exercise period of the related warrants by fifteen months from the current date of expiration.   The Company received cash proceeds of $102,825 from participants to the warrant extension offering.  Additionally, the Company issued 1,400,000 warrants under an exclusivity agreement with Nova Chemicals, Inc.  These warrants were immediately exercised in December 2004; therefore no value was assigned (see Note 13).  Also during 2004, 400,000 warrants expired.    

During the period ended December 31, 2003, warrants to purchase common stock of the Company, in the amount of 600,000 shares, were reported as canceled in error.  The warrants have been reinstated to reflect proper disclosure and account allocation for the periods ended December 31, 2003 and 2004.  The assumptions utilized to estimate the fair value of warrants issued by the Company were specific to the issuance dates of the warrants and the assumptions ranged according to the following: risk-free interest rate of 3 to 4%, terms of 2 to 5 years, strike prices of $0.20 to $0.75 and volatilities of 53% to 101%.

During the year ended December 31, 2003, the Company entered into a promissory note arrangement with two Company shareholders, in the principal amount of $100,000.  The note bears an interest rate of 15% per annum with principal and interest payment payable in 36 equal monthly installments of $3,467 commencing September 1, 2003.  Three common stock warrants are attached to each dollar of debt, with an exercise price of $0.20 per share, with each warrant being valued at $0.11 per share.  These warrants are fully exercisable for up to three years from the dates of issuance.  The Company used the assumptions of a 4% interest rate, volatility of 69% and a three-year period to calculate the warrant value.   The calculated fair value of the warrants, in the amount of $32,810, has been recorded as a discount on the debt issued and is being amortized over the life of the debt.  During the years ended December 31 2003 and 2004, the Company has amortized this discount on debt, in the amounts of $3,646 and $10,938, respectively.  The accumulated amortization for the respective years is $3,646 and $14,584.  During the quarter ended March 31, 2005, the Company has amortized this discount on debt in an amount of $2,734.  The accumulated amortization for the discount on debt relating to this promissory note is $17,318.The amortization previously described is reflected in the financial statements as a charge to interest for the respective periods.  See Note 5.

During the year ended December 31, 2003, the Company entered into a promissory note with a director and shareholder, in the principal amount of $200,000.  The note bears an interest rate of 15% per annum, with principal and interest payment payable in 36 equal monthly installments of $6,933, commencing January 1, 2003.  Three common stock warrants are attached to each dollar of debt, with an exercise price of $0.20 per share, with each warrant being valued at $0.13 per share.  These warrants are fully exercisable for up to three years.  The Company used the assumptions of a 4% interest rate, volatility of 69% and a three-year period to calculate the warrant value.  The calculated fair value of the warrants, in the amount of $78,000, has been recorded as a discount on the debt issued and is being amortized over the life of the debt.  During the year ended December 31 2004, the Company has amortized this discount on debt, in an amount of $26,000.  During the quarter ended March 31, 2005, the Company has amortized this discount on debt in an amount of $6,500.  The accumulated amortization for the discount on debt relating to this promissory note is $32,500. This amortized amount increased accumulated amortization for the year ended December 31, 2004 in the amount of $26,000.  The amortization previously described is reflected in the financial statements as a charge to interest for the respective periods.  See Note 5.

In December 2003, with the exception of the notes discussed in the two paragraphs above, the Company rolled all of its remaining outstanding notes payable and accrued interest to related parties into new notes.  These notes bear an interest rate of 12% per annum, with interest payments made in equal monthly installments of varying amounts, commencing on January 1, 2004.  Common stock warrants to purchase up to an aggregate of 5,125,000 shares of Company common stock were attached to these loans, with an exercise price of $0.24 per share.  The Company calculated a fair value for these warrants, in the amount of $138,888.  The Company used the assumptions of a 4% interest rate, volatility of .69% and a three-year term to calculate the warrant value.  Subsequent to reporting the original transaction as previously described, the Company discovered a defect in the assumptions utilized to calculate the fair value of the newly issued and extended warrants.  The revised assumptions utilized to calculate the warrant value are a 4% interest rate, volatility of 69% and a three-year term.  The restated warrant valuation of $596,038 has been recorded as a discount on the debt issued and is being amortized over the life of the debt.  During the year ended December 31 2004, the Company has amortized this discount on debt, in an amount of $198,679.  This amortized amount increased accumulated amortization for the year ended December 31, 2004 in the amount of $198,679.  During the quarter ended March 31, 2005, the Company has amortized this discount on debt, in an amount of $49,670. For the period ended March 31, 2005, this amortized amount increased accumulated amortization pertaining to this promissory note to $248,349.  The amortization previously described is reflected in the financial statements as a charge to interest for the respective periods.  See Note 5.

During the year ended December 31, 2003, the Company sold 2,216,250 shares of its common stock at $0.19 per share to purchasers who received warrants to purchase one additional share of common stock for each share purchased, exercisable at $0.40 per share for a period of one year.  The warrants were valued at $68,935 and were recorded in the Company's operating expenses as a finance charge.

In February 2003, the exercise price of 720,000 warrants was adjusted from $0.50 to $0.15.  All of these warrants were subsequently exercised, resulting in the issuance of 720,000 shares of common stock for $108,000.  As the new warrants were modified and exercised on the same date, the effect of these transactions was to create a charge to earnings, in the amount of $37,900, which charge has been included in the Company's amended and restated financial statements for the period ended December 31, 2003.  The modified fair value of the exercised warrants ranged from $0.1041 - $0.1379 per share.  The assumptions used to calculate the $37,900 modified fair value of warrants exercised are: risk free interest rate of 4%, volatility of 85.67%, terms between 602 - 613 days, strike price of $0.15 per share, and market prices between $0.20 - $0.24 per share.   In addition, the Company issued 720,000 warrants to these investors which have an exercise price of $0.75 and expire during May of 2006.  The amount charged to earnings, and recorded as a finance charge in the amount of $25,816, has been included in the Company's amended and restated financial statements for the period ended December 31, 2003.  The assumptions used to calculate the $25,816  modified fair value of warrants granted are: risk free interest rate of 4%, volatility of 85.67%, term of two years, strike price of $0.75 per share, and market prices between $0.20 - $0.24 per share.      

During June 2002, 1,500,000 shares of common stock with one warrant attached to each common stock share were issued.  Each warrant is exercisable at $0.25 per share until late June 2004.  These warrants were valued at an average price of $0.03 per share, for a total of $42,000.

During April 2002, 1,000,000 shares of common stock with one warrant attached to each common stock share were issued.  Each warrant is exercisable at $0.25 per share until April 3, 2004.  These warrants were valued at an average price of $0.06 per share, for a total of $55,000.

During March 2002, 500,000 shares of common stock with one warrant attached to each common stock share were issued.  Each warrant is exercisable at $0.25 per share until March 12, 2004.  These warrants were valued at an average price of $0.06 per share, for a total of $31,050.

During 2001, $1,025,000 was raised in a private debt offering.  The notes attached to this debt were subsequently rolled into new notes (see discussion above concerning the issuance of new notes).  Three warrants were attached to each dollar of debt, with an exercise price of $0.195 per share.  These warrants were fully exercisable for up to two years from the dates of issuance.  These warrants were valued at $0.07 per share, for a total of $219,642, using the valuation assumptions of 4% interest and a volatility of 91.25%.  The warrant value has been recorded as a discount on the debt issued and the discount was amortized over the two year life of the debt.  Accordingly, interest expense was recognized in the amount of $109,821, in each of the years ended December 31, 2002 and 2003.  The valuation previously described required the Company to amend and restate its financial statements for the years ended December 31, 2001, 2002 and 2003, to reflect the amortization of the discount on debt, versus the prior accounting treatment which showed the value of the warrants as an immediate charge to earnings and recorded as a finance charge.  

During June 2001, 1,000,000 shares of common stock with one warrant attached to each common stock share were issued.  Each warrant is exercisable at $0.50 per share until June 30, 2003.  These warrants were valued at $0.06 per share, for a total of $60,000. 

**NOTE 8 - INCOME TAXES**

At March 31, 2005, the Company had net deferred tax assets of approximately $2,080,000, principally arising from net operating loss carryforwards for income tax purposes.  The Company calculates its deferred tax asset using a combined State and Federal tax rate of 39.5%.  As the Company's management cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at March 31, 2005. 

The significant components of the deferred tax asset at March 31, 2005 and December 31, 2004 are as follows:  
|                                   |   |   |                                                         |                                                                   |                                                                   |  March 31,                                              |                                                             |                                                                   |  December 31, |
|----------------------------------------|--------|--------|--------------------------------------------------------------|------------------------------------------------------------------------|------------------------------------------------------------------------|--------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------------|--------------------|
|                                   |   |   |                                                         |                                                                   |                                                                   |  2005                                                   |                                                             |                                                                   |  2004         |
|                                   |   |   |                                                         |                                                                   |                                                                   |                                                              |                                                             |                                                                   |                    |
| Net operating loss carryforward        |   |   | $                                                            |            5,266,000 |                                                                   | $                                                            |           5,170,000 |
|                                   |   |   |                                                         |                                                                   |                                                                   |                                                              |                                                             |                                                                   |                    |
| Deferred tax asset                     |   |   |                                                         | $                                                                      |            2,080,000 |                                                         | $                                                                |            2,040,000 |
|                                   |   |   |                                                         |                                                                   |                                                                        |                                                         |                                                             |                                                                        |
| Deferred tax asset valuation allowance |   | $      |          (2,080,000) |                                                                   | $                                                                      |          (2,040,000) |
|                                   |   |   |                                                              |                                                                   |                                                                   |                                                              |

 

At March 31, 2005, the Company had net operating loss carryforwards of approximately $2,080,000, which expire in the years 2018 through 2025.  The change in the allowance account from December 31, 2004 to March 31, 2005 was $40,000. 

The Company recognized $741,000 of losses from the issuance of stock options during the period ended March 31, 2005, which were not deductible for tax purposes.     

**NOTE 9 - COMMITMENTS AND CONTINGENCIES**

Operating Lease Agreements

The Company entered into a lease for office space in Orlando, Florida on September 16, 2002 for a period of 36 months.  Lease payments are currently $3,021 per month, with additional charges for common area.  A security deposit was paid in the amount of $2,600.  Total payments under this lease for the three months ended March 31, 2005 and 2004 were $9,064 and $8,719 respectively. 

The Company entered into a lease for office space in Boca Raton, Florida on February 7, 2001 for sixty months.  Lease payments, including charges for common area, are ****currently $4,942.  A security deposit and last month's rent were paid in the amount of $8,412.  A portion of this space is being subleased, with the sublessee reimbursing the Company $3,000 per month.  The Company's net lease payments amount to $1,942.  Total net lease payments for the three months ended March 31, 2005 and 2004 were $5,826 and $5,293, respectively. 

The future minimum lease payments below for the Boca Raton office are the total amount of the payments as if there was no sublease.  The Company anticipates the sublease to continue through the end of the lease term.

The Company also records as rent expense, payments to officers and directors for lodging reimbursement, but the Company is not contractually bound by lease agreements to make such payments.  For the three months ended March 31, 2005, the Company recorded $7,273 related to these transactions.

Future annual minimum operating lease payments for the terms of the Orlando and  Boca Raton lease agreements are as follows for the years ending December 31:
|      |  |   | Orlando             Office |  |   | Boca Raton             Office |  |   | Total                                            |  |
|------|--|---|----------------------------|--|---|-------------------------------|--|---|--------------------------------------------------|--|
|      |  |   |                            |  |   |                               |  |   |                                                  |  |
| 2005 |  | $ | 18,126                     |  | $ |     17,478     |  | $ |        35,604 |  |
|      |  |   |                            |  |   |                               |  |   |                                                  |  |
| 2006 |  | $ |    -             |  | $ |   3,884                  |  | $ |     3,884                         |  |

The Company leases its facility in Mims, Florida, which was acquired in the acquisition of TCD, to its joint venture entity, LRM, LLC.  The two-year agreement provides for rents of $7,000 per month.  These transactions have been eliminated in the consolidation of these financial statements.

Capital Leases Agreements

During the year ended December 31, 2003, the Company acquired computer equipment through two capital leases.  The Company recognizes the value of the equipment in property, plant and equipment in the financial statements and the lease liability in both current liabilities and long-term liabilities on the financial statements.  The leases, totaling $9,463, are for 36 months, with interest and principal payments of $345 per month. 

During year ended December 31, 2004, the Company acquired additional computer equipment under capital lease agreements.  These leases, totaling $6,132, are for 36 months, with interest and principal payments of $222 per month. 

Litigation

The Company is a named defendant in an action filed by Mr. Real Morel in May 2000 in the Supreme Court of British Columbia, Canada. In this action, Mr. Morel alleges non-payment by the Company of amounts due pursuant to the aforementioned demand promissory notes.  After consultation with British Columbia legal counsel and a review of the circumstances surrounding the issuance of the notes, the Company has resolved to dispute this liability.  Management of the Company believes that the outcome will not have a material adverse effect on the financial position of the Company.

The Company is a named defendant along with others including a director of the Company in a proceeding filed in the Superior Court of Cumberland County, Maine by former employees of Sports Quest of New England LLC, for back wages and penalties, which could total more than $300,000.  The Company has denied all liability, ownership, or other involvement with Sport Quest LLC.  The matter is in the pleading stage. 

The Company is the defendant in an action commenced by its former law firm for unpaid legal services in the amount of $18,952.  The Company has filed a motion to dismiss.  The motion is still pending. Although the Company intends to vigorously defend the action, there have been discussions with the plaintiff concerning a settlement.  The Company has included in the accompanying financial statements a liability for $18,952.  

Schaefer Systems International, Inc.

On March 28, 2003, the Company entered into a product development agreement with Schaefer Systems International, Inc., (hereinafter "SSI") wherein the Company would design, develop and produce a quantity of prototypes for field testing.  An initial payment of $61,215 was made by SSI to the Company to facilitate the development of a proprietary product. 

The Company has delivered part of the first run of development parts.  The initial period of the development contract has expired.  Due to changes from both SSI and the company that is constructing the prototypes, the final product has not been finished.  At such time as the product is delivered to SSI in its final form, the Company will recognize the initial deposit as revenue.

**NOTE 10 - ACQUISITIONS**

In March, 2005, the Company announced that it had executed a definitive merger agreement in which Thermoplastic Composite Design (hereinafter "TCD") merged with and into the Company's wholly-owned subsidiary, Envirokare Composites Corp. (hereinafter "ECC").  The transaction combined all of TCD's business, including its intellectual property, property, plant and other assets, including contracts with ECC.

Upon completion of the merger with TCD into the Company's wholly-owned subsidiary, ECC, the operating assets in TCD were assigned to LRM Industries, LLC ("LRM"), through ECC.   TCD, as such, has no operations and LRM is the operating entity.  Accordingly, the Company consolidates LRM's operations in its reporting.  As a result of the structure as previously described, there are no operating results for TCD to report.  LRM reports its financial activities on a quarterly basis and has elected a year end of December 31.  The operating activities of LRM are consolidated in the Company's periodic financial reports.  The merger agreement provided for an initial payment of $2.5 million to TCD shareholders and a subsequent schedule of payments over a seven-year period totaling $15 million.   The current value of this note was determined by applying a discount rate of 12%.  The original note value under this discount was $8,157,208, of which $2,500,000 was paid during the quarter ended March 31, 2005.

The intangible asset obtained in the acquisition of TCD was incorporated into and recorded as patent value, in conjunction with the purchase price for TCD and the real property and equipment, as previously discussed.  The audit of TCD's books and records for the years ended December 31, 2003 and 2004 was completed and it was determined that in-process research and development, that realized gross margin profits in an approximate amount of $12,500, existed at the close of the merger.  This amount has been included as a component of the assets acquired in the merger with TCD.  Following is a summary of the assets acquired under the TCD merger agreement:

| Equipment            |   | $      |       350,000            |
|----------------------|--------|--------|---------------------------------------------------|
| Real property        |   |   |       400,000            |
| Contracts in-process |   |   |         12,500 |
| Patents              |   |   |    7,394,708                            |
|                 |   |   |                                                   |
| Assets acquired      |   | $      |    8,157,208                            |
|                 |   |   |                                                   |

Also in March, 2005, the Company announced that ECC executed a 50/50 joint venture agreement with Nova Chemicals, Inc., and created a new company, LRM Industries LLC, to commercialize the Company's TPF Thermoplastic Flowforming technology.  The Company has contributed its intellectual property rights, technology, manufacturing equipment and all TPF Thermoplastic Flowforming business activities which were acquired through the merger with TCD into the joint venture, while Nova Chemicals has contributed $5,000,000 in cash and has agreed to contribute future services valued at $1,000,000.  The joint venture is accounted for as a subsidiary of the Company.

Following is a summary of the net assets contributed to LRM by the Company:

| Equipment                                                                  |   | $      |      350,000            |
|----------------------------------------------------------------------------|--------|--------|---------------------------------------------|
| Contracts in-process          |   |   |        12,500 |
| Patents                                                                    |   |   |   7,394,708                            |
|                                                                       |   |   |                                             |
| Net assets contributed                                 |   | $      |   7,757,208                            |
|                                                                       |   |   |                                             |

The Company issued 1,300,000 options to employees and consultants of LRM (former employees of TCD), in connection with the acquisition of TCD.  Aspects of this issuance were previously discussed in Note 7, above.  The fair value ascribed to the option grants is $741,000.  This amount has been expensed during the current year in the consolidation of the Company's financial statements and reported as a charge to compensation expense.  The Black-Scholes model was utilized to calculate the value of these options and the assumptions used to calculate the fair value of the options issued to former TCD shareholders were a risk-free interest rate of 4%, volatility of 94% and a term of three years.  The calculated value for these option shares was $0.57 per share and the options were granted at an exercise price of $0.94 per share.  The Company has also contributed equipment and in-process contracts to LRM, in the amounts of $350,000 and $12,500 respectively.

**NOTE 11 - CORRECTION FOR ERRORS**

The accompanying consolidated financial statements have been restated to correct information concerning certain transactions that are described in general in this Note 14 and in more detail in respective Notes above. 

Amortization of TCD License

In March 2001, the Company obtained the rights to its TPF Thermoplastic Flowforming process in exchange for cash consideration of $525,000.  The Company has determined that it was appropriate to amortize the value of the license over the initial period of the license grant, which expired September 30, 2003.  See Note 4. 

Impairment of Patent Value

On December 1, 2000 the Company acquired technology rights, in exchange for common stock shares in the Company.  The Company has determined that it was appropriate to amortize the value of the patent commencing from the date of acquisition of the patent and has amended its financial statements to recognize amortization during the fiscal years ended 2001 and 2002 and for nine months ended September 30, 2003.  The Company also has determined that impairment exists on the value of the patent and has amended its financial statements for the period ended December 31, 2003 to recognize this impairment.  See Note 4.

During 2003, the Company raised $300,000 in a private debt offering.  The notes included attached warrants.   The warrant value has been recorded as a discount on the debt issued and the discount has been amortized over the life of the debt as a charge to interest expense.  The valuation previously described required the Company to amend and restate its financial statements for the years ended December 31, 2003 and 2004, to reflect the amortization of the discount on debt.  See Note 5 and Note 7. 

During 2001, the Company raised $1,025,000 in a private debt offering.  The notes, including attached warrants, were subsequently rolled into new notes with attached additional warrants.  The warrant value has been recorded as a discount on the debt issued and the discount has been amortized over the life of the debt as a charge to interest expense.  The valuation previously described required the Company to amend and restate its financial statements for the years ended December 31, 2001, 2002 and 2003, to reflect the amortization of the discount on debt.  See Note 5 and Note 7. 

In December 2003, the Company rolled all of its outstanding notes payable and accrued interest to related parties, as described in the previous paragraph and relating to the 2001 debt offering, into new notes, which contained attached warrants.  Subsequent to reporting the original transaction, the Company discovered a defect in the assumptions utilized to calculate the accounting exposure of the newly issued and extended warrants.  Based on the revised assumptions, the Company has revalued the newly issued and extended warrants and has amended its financial statements for the years ended December 31, 2003 and 2004 to recognize amortization of the discount.  See Note 5 and Note 7.

Stock Options and Warrants

The accompanying consolidated financial statements had been restated to correct information concerning stock options granted during 2003, and the Company's valuation thereof.  The effect of the restatement was to increase related party consulting fees as reported and stock options and warrants in the amount of $529,811.  Accordingly, the Company's accumulated deficit at December 31, 2003 had been restated to reflect this correction.  The correction increased the Company's loss per share by $0.02.** **

Additionally, the Company has reclassified various expenses for the year ended December 31, 2003.

Subsequent to the consolidated financial restatement to record changes in accounting treatment of various items, as previously described, the Company made certain adjustments to its financial statements for the year ended December 31, 2003, to correct errors in calculating its previously stated expense arising from the reissuance of certain warrants, the effect of which carry forward to ensuing reporting periods.  The post 2003 financial reporting effects of the previously described adjustments also appear in the Company's accumulated deficit, additional-paid-in capital and stock options and warrants accounts. See Note 7. 

The cumulative effects of the financial statement amendments and the correction for an accounting error, as described above in this Note 11, resulted in the following changes to the Company's financial statements:  For the year ended December 31, 2004, the Company had originally reported a net loss of $1,824,817, and the corrected net loss is $2,060,434.  The Company had reported an accumulated deficit of $7,874,110, which is now recognized as $10,992,260.  The Company's losses per share increased by $.01 per share, from $.05 to the corrected value of $.06 per share.  For the three month period ended March 31, 2005, the Company had originally reported a net loss of $142,332, and the net corrected loss is $915,935.  The Company had reported an accumulated deficit of $8,016,442, which is now recognized as $11,908,195.  There was no change in the earnings per share loss, as a result of the restated financial reports.

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**ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

                Envirokare Tech, Inc. (the "Company" or "Envirokare") is engaged in the application design, development and manufacturing, utilizing proprietary thermoplastic composite technologies including TPF Thermoplastic FlowformingTM.  Subsequent to end of the fiscal year ended December 31, 2004 and upon the closing of the Merger Agreement between the Company's subsidiary Envirokare Composite Corp. ("ECC") and Thermoplastic Composite Designs, Inc ("TCD") and of the Joint Venture Agreement (LRM Industries, LLC, or "LRM") between Envirokare Composite Corp. and NOVA Chemicals, Inc. ("NOVA") described below, the Company's TPF Thermoplastic Flowforming business is being conducted through its position and interest in LRM.

*                Technology:*  The TPF Thermoplastic Flowforming process is a proprietary process developed by TCD that enables the manufacture of large structural parts using long-fiber reinforced thermoplastic resins. The process utilizes recycled or virgin resins and is designed to reuse its own production scrap, thereby eliminating production waste by-products.  TPF Thermoplastic Flowforming process patents have been issued under United States Patent and Trademark Office patent nos. 6,719,551, 6,869,558 and 6,900,547.  These patents provide a system and method for forming an article from thermoplastic material and fiber.

                Historically, advanced composite materials were utilized almost exclusively by the military and aerospace industries where such usage was normally restricted to the manufacture of small parts due to the inordinate cost of hand application, i.e., the process of manually applying layers of composite materials to a mold or shape.  Management believes that the TPF Thermoplastic Flowforming process provides a cost-effective alternative for the in-line production of larger, long-fiber reinforced plastic parts at very low processing costs.  The process has key advantages over many manufacturing processes currently in use such as compression molding, injection molding and rotational molding.  The Company believes that these advantages provide for significant cost savings realized by utilization of the TPF Thermoplastic Flowforming process in the reduced labor required to create larger parts and reduced costs in assembly of larger parts which are made up from a number of smaller components.  Material costs will typically also be lower due to the ability of the process to use recycled materials, reuse of its own production scrap and utilize in-line compounding, which is the process of mixing raw material components as an actual part of the production process.

                The TPF Thermoplastic Flowforming process has application in a broad range of industries including: agriculture, automotive, material handling, transportation, marine, medical, waste management and aerospace.  TPF Thermoplastic Flowforming composite products are an advantaged replacement for many wood, aluminum, steel, other metal alloys, concrete, other plastic and fiberglass products, by providing products that have corrosion resistance, are lighter and cost less to manufacture.  As a thermoplastic process, TPF Thermoplastic Flowforming has an additional advantage in that it does not emit volatile organic contaminants (VOCs).

                The Company entered into agreements acquiring specific application rights to this technology through license and merger agreements with TCD dated March 30, 2001, wherein the Company, through its wholly-owned subsidiary ECC, was granted rights to commercially exploit the TPF Thermoplastic Flowforming process in certain specific field-of-use applications.

                On March 3, 2005, the Company completed a merger of TCD, a Florida corporation, into ECC resulting in the acquisition of TCD including the assets comprised of real property, plant, equipment and intellectual property, in exchange for cash and notes, as generally outlined below.  These merger terms were modified from the March 30, 2001 merger agreement.

                The "Merger Consideration" equaled the sum of (i) fifteen million dollars ($15,000,000) (the "Fixed Merger Consideration") and (ii) the aggregate amounts payable in accordance with Section (h) of the Merger Agreement: (the "Contingent Merger Consideration").  Following are the general payment terms to TCD Shareholders, as set forth in the Merger Agreement;

                (a) At the Closing, ECC shall pay the Shareholders $2,500,000.

                (b) The balance of the Merger Consideration shall be paid to the TCD Shareholders in eight (8) annual installments following the Closing with the first such payment due on or prior to January 31, 2006 and the last such payment due on or prior to January 31, 2013 (and such payments shall be deemed to be distributed to the Shareholders of TCD in complete liquidation), with each annual payment to be equal to 2.5% of the "Consolidated EBIDTA" of LRM Industries, LLC ("LRM")  for each calendar year, commencing with the calendar year ending December 31, 2005, up to a maximum aggregate of $12,500,000 for all payments under this subsection (b).  LRM is the Company's Joint Venture Company with NOVA Chemicals, Inc.

                (c) In the event that 2.5% of the Consolidated EBIDTA of LRM during the first four years after the Closing Date (ending on December 31, 2008) is less than an aggregate of $2,000,000, ECC shall pay to the Shareholders any amount by which $2,000,000 exceeds 2.5% of the aggregate Consolidated EBIDTA of LRM during this period within 31 days after the end of the fourth year.

                (d) In the event that 2.5% of the Consolidated EBIDTA of LRM during the years five six and seven after the Closing Date (ending on December 31, 2011) total less than an aggregate of $3,000,000, ECC shall pay to the Shareholders any amount by which $3,000,000 exceeds 2.5% of the aggregate Consolidated EBIDTA of LRM during the period, within 31 days after the end of the seventh year.

                (e) At the end of the eighth year (ending December 31, 2012), in the event that the TCD Shareholders have not been paid $15,000,000 by virtue of the payments set forth in Section 2.01 (a), (b), (d) and (e), ECC shall pay on or prior to January 31, 2013, any amount by which $15,000,000 exceeds all monies paid to the Shareholders to date under Section 2.01(a), (b), (d) and so that the total payments made aggregate $15,000,000. 

                (f) In the event that a cash payment is due the Shareholders pursuant to this paragraph, any TCD Shareholder may elect to receive this payment in four equal annual payments beginning at the end of the eighth year set out above.  Unpaid but due balances will carry interest equal to LIBOR plus one percent but not to the extent a Shareholder elects a deferral under the provisions of the prior sentence.

                (g) The assurance of any such payments to be made pursuant to this Section is provided only by ECC and guaranteed by LRM and Parent (Envirokare) as set forth below.  The Parties acknowledge that no such assurance is being provided by NOVA or any of NOVA's affiliates or subsidiaries other than ECC, LRM and Parent.

                (h) Ongoing Payments.  As additional Merger Consideration (the "Contingent Merger Consideration"), beginning January 1, 2013, the Shareholders shall be entitled to receive from ECC payments annually equal to their pro rata share of 1% of the Net Income of LRM payable to the extent of and at the time of distribution of such Net Income to ECC or 90 days after the end of each year, whichever is sooner.

                 The obligations of ECC to pay the Fixed Merger Consideration and the Contingent Merger Consideration are guaranteed by LRM and the Company, and are evidenced by guaranties executed and delivered by the Company and LRM to the TCD shareholders.

                As part of the transaction described above, ECC sold to LRM, under an Asset Purchase Agreement, equipment and other personal property located in Mims, Florida and intellectual property acquired in the merger transaction described in this section.  Other than real estate owned and leased to LRM, these assets were substantially all of the assets of ECC sold to LRM as part of the transaction in which ECC acquired a 50% interest in the LRM, the joint venture company (see below).

                On March the 3, 2005, the Company through, its wholly-owned subsidiary ECC, executed a Limited Liability Company Agreement with NOVA creating a joint venture Company, LRM, which is a Delaware limited liability company created for the purpose of commercializing the Company's TPF Thermoplastic Flowforming technology, including but not limited to the manufacture, marketing, sales and/or licensing of the technology.

                LRM is owned one half each by ECC and NOVA and is capitalized as generally set forth in the joint venture agreement between NOVA and ECC as follows:

                1.1 Contribution of Envirokare. ECC shall make no Contributions to the Company, initially, and need not make any additional Contributions unless, in its sole discretion, it decides to do so, subject to approval. ECC is selling certain assets to the Company (i.e. LRM) pursuant to the Asset Purchase Agreement and ECC shall be paid the amounts specified below as consideration for such transfer.

                1.2 Contributions of NOVA. NOVA has made and shall make Contributions to the Company as follows:

                On the date of this Agreement, NOVA will contribute five million dollars ($5,000,000.00) to the Company (the "NOVA Investment").  In addition to the NOVA Investment, NOVA will also contribute one million dollars ($1,000,000.00) in services to the Company (i.e. LRM), pursuant to the NOVA Service Agreement, an exhibit to the Limited Liability Company Agreement.

              As part of the Limited Liability Company Agreement, ECC entered into a lease agreement providing for the lease of the plant property in Mims, Florida to LRM for a period of two years with an option to renew for an additional two years.  Lease payments payable to ECC equal $84,000 per year for the first two years and $91,200 per year for the two year renewal period. In addition, the property is subject to a cellular tower lease providing for additional payments, in the amount of $12,000 per year, to ECC as successor to TCD.

                Product Research, Development and Testing:

*               Product Development -*   Product Research, Development and Testing continued during the period by LRM on a product by product basis, primarily in response to customer product development orders.  During the first half of 2005, LRM announced a research and development contract with the U.S. Government for development of electromagnetic interference composite shelters valued at $1,000,000; a development contract with  Hydrogenics for development of a hydrogen generation system component, and; a development agreement with E.I. DuPont de Nemours and Company to explore the utility of the Company's TPF Thermoplastic Flowforming technology for a variety of applications within, among other potential industrial market segments, the building and construction markets.

                Product Marketing and Market Exploitation:

                The Company's plan for the marketing and exploitation of its technologies over the next twelve (12) months through LRM, its joint venture with NOVA Chemicals, Inc., includes:

                a. direct development and manufacturing of products for materials handling, construction, housing, marine and other commercial and consumer applications.

                b. 3rd party licensing of TPF Thermoplastic Flowforming technology for specific applications and products as well as for specific geographic areas.

                c. product development for 3rd party applications and licensed manufacturing.

                Purchase of Plant and Significant Equipment and Expected Significant Changes in Number of Employees:

                The closing of the Merger Agreement with TCD and combining that company with Envirokare's wholly-owned subsidiary ECC brought into the Company an existing TPF Thermoplastic Flowforming production facility including equipment and leased premises.  The size of this facility is limited and the facility is used primarily for product development and small production runs.  During the current fiscal year, the Company continued preliminary feasibility and development efforts focused on assessing the merits of building a full scale production facility for manufacture of Company and third party products at this facility.  However, no specific manufacturing site has been contracted for to date.  During the near term, the Company's business will be conducted through its position in LRM (see above).  

                The Company anticipates that LRM will add personnel required for operation of the existing facility and to facilitate expansion of the business.  One of the Company's consultants has become a consultant to LRM and the joint venture directly retains personnel to meet various staffing requirements.   The Company does not expect to add key employees to its own staff during the year.

                Liquidity:

                The Company has budgeted expenditures of $600,000 for the 12 months ending March 31, 2006.  During the three month period ended March 31, 2005, the Company raised $25,000 through warrant exercises, in addition to receiving $15,000 from the exercise of stock options.  The Company had cash remaining at March 31, 2005 in the amount of $2,574,635, which includes cash balances in LRM.  LRM was initially capitalized with a $5,000,000 contribution in cash and $1,000,000 in services to be provided by NOVA.  LRM has budgeted to spend $1,572,000 during its first year of operation.  The significant changes in assets during the three month period ended March 31, 2005 were due to (i) the recognition of non-cash prepaid services to be provided by Nova to LRM during the next two years, with the prepaid services set out as a current prepaid expense, in the amount of $600,000 and long term prepaid expense, in the amount of $400,000, (ii) a change in the net patent amount, as a result of the recognition of consideration received through the merger of TCD into ECC and the formation of the LRM joint venture, which includes the net present value of payments to be made to TCD shareholders as committed to in the merger agreement, the $2,500,000 cash provided to LRM as operating capital at the merger date completion and the inclusion of $12,500 in-process contracts that passed through to the benefit of LRM from the Company's wholly-owned subsidiary, ECC, (iii) the deposits for stock purchase which were applied to the acquisition of common stock upon completion of the transactions during the period ended March 31, 2005, and (iv) the increase in accrued interest due to notes payable to a former director and officer, such payments that are in legal dispute by the Company.  The Company expects to raise any required additional operating funds by sales of shares of its common stock conducted through private placement offerings and through funds received from individuals exercising warrants or options.  Although management believes these capital sources to be sufficient to meet the needs of its operations, there is no assurance that the Company will be successful in raising additional capital to fund its operations.

                Financial Position:   

                The Company consolidates its activities for all financial reporting purposes.  For the three month period ended March 31, 2005, the Company had a cash balance of $2,574,635 compared to a cash balance of $432,155 for the year ended December 31, 2004.  The increase in cash was due to participation in the ownership of LRM Industries, LLC, wherein the Company acquired a 50% ownership interest in that entity during the quarter ended.  For the three month period ended March 31, 2005, the Company reported property and equipment in the amounts of $375,292 and $400,000, respectively compared to an equipment balance of $25,292 for the year ended December 31, 2004.  The increase in the property and equipment amounts is attributed to the acquisition of TCD Inc., by merger, during the quarter ended.  For the three month period ended March 31, 2005, patents were valued at $7,453,859 compared to $33,939 for the year ended December 31, 2004.  The increase in patent values is primarily due to participation in the formation of a joint venture entity, LRM Industries, LLC and the incorporation of the net present value of the merger consideration provided by the Company to the joint venture entity, LRM.  Accounts payable for the three month period ended March 31, 2005 were $425,511 compared to $330,933 for the year ended December 31, 2004. The 29% increase in accounts payable for the period is primarily due to increased operating costs experienced by the Company and by the Company's joint venture interest.   The Company also reported a minority interest in a subsidiary during the three month period ended March 31, 2005, in the amount of $4,995,764.  This amount represents the Company's 50% interest in its joint venture with NOVA Chemicals Inc. 

                Results from Operations: 

                For the three month periods ended March 31, 2005 and 2004, the Company reported no revenues.  Total operating expenses reported by the Company for the three month period ended March 31, 2005 and 2004 were $1,106,052 and $265,256, respectively. The comparative 3 fold increase in expenses was primarily due to increased operating activities within the Company's joint venture interest.  During the three months ended March 31, 2005, the Company realized a gain on an exclusivity agreement in the amount of $280,000, as a result of completing a joint venture agreement with NOVA Chemical Inc. during the quarter ended and recognizing the deposit as a financial gain.  The net loss reported by the Company for the three months ended March 31, 2005 was $915,935 compared to a net loss for the three months ended March 31, 2004 in the amount of $328,823.  The increase in net loss was primarily due to recognition of compensation expense arising from the issuance of options to former TCD shareholders in completing the merger with TCD, as set off against a realized gain on the exclusivity agreement, as previously discussed.

**ITEM 3. CONTROLS AND PROCEDURES**

                (a) Evaluation of Disclosure Controls and Procedures

                We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2005, the end of the quarterly fiscal period covered by this quarterly report. The controls evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported to management, including the Chief Executive Officer and the Chief Financial Officer to allow timely decisions regarding required disclosure. 

                Subsequent to the Company filing its interim Form 10-QSB for the period ended June 30, 2005, the Company determined that options granted to certain key management team members and consultants had been issued just prior to the completion of the interim period, but the value of these options were not accounted for in the Company's financial statements and associated notes.  The Company immediately, upon recognizing this deficiency, prepared and filed an amended and restated Form 10-QSB for the period ended. 

                Notwithstanding the Company's current disclosures concerning the TCD license, the Company amended its filings for the Fiscal Years ended December 31, 2004, 2003, 2002 and 2001, to reflect the amortization of the TCD license, with amortization of the license commencing on the date of acquisition and with the license being fully amortized by the end of the original license agreement date, September 30, 2003.  The Company also amended the financial statement note disclosure concerning the TCD license to reflect the amortization of that license.

                Notwithstanding the Company's prior statements and disclosures relating to the accounting treatment of the Company's acquired patent application entitled "Apparatus and Method for Facilitating Shipping and Commerce", the Company amortized the value of the patent during the Fiscal Years ended December  31, 2001, 2002 and the nine month period ending September 30, 2003 and wrote down the remaining full value of the intangible asset during the Fiscal Year ended December 31,  2003 and restated its financial statements to reflect the effect of the write down against retained earnings for the periods ended December 31, 2003 and December 31, 2004, and amended its note disclosures for the same periods to disclose the accounting treatment applied for the intangible asset. 

                Notwithstanding the Company's prior statements and disclosures relating to the accounting treatment for 5,125,000 warrants issued in December 2003, as a part of a restructured debt offering by the Company, it has elected to amend its treatment of these warrants which resulted in an additional charge to earnings of $457,150 for  the Fiscal Year ended December 31, 2003.   The Company filed an amended Form 10-KSB, for the Fiscal Years ended December 31, 2004 and 2003, to reflect this restatement, in conjunction with the amendment that flows from accounting treatment of the original issuance of debt.

                Notwithstanding the Company's prior statements and disclosures relating to the accounting treatment for 900,000 warrants issued in connection with a private debt offering undertaken by the Company in December 2003, the Company has elected to amend its treatment of these warrants which resulted in a charge to earnings of $110,813 for the Fiscal Year ended December 31, 2003 and which charge was recorded as a finance charge in the Company's Statement of Operations for the year then  ended.  

                Notwithstanding the Company's prior disclosures as contained in its prior financial reports related to a warrant exercise that took place during late 2003, the Company has elected to take a charge to earnings in the period ended December 31, 2003, the period in which the warrants were modified. 

                Notwithstanding the Company's prior disclosures as contained in its prior financial reports for interim reporting periods ended during 2005 and that relate to options granted to former TCD shareholders and employees as part of the merger between TCD and the Company's wholly-owned subsidiary, ECC, the Company determined that it was appropriate to expense the fair value of the options, in an amount of $741,000, versus the prior treatment that capitalized the option values as a component of patent value, which would be amortized over the life of the patents acquired in the merger of TCD into ECC.

                The restatement referred to, related to certain transactions that occurred at the end of the reported Quarter and further related to the closing and continued implementation of the Company's merger with TCD and its formation of its joint venture with NOVA Chemicals.  During this critical period, the Company also lost one of its longest term directors and head of its audit committee, Jonathan Edelstein, who died during the first Quarter; this in addition to the Company losing its staff accountant whose activities were directly related to the reporting issuer.  The situation was addressed immediately upon discovery by the Company.  

                Subsequent to the initial filing of the annual report on Form 10-KSB for the Fiscal Year ended December 31, 2004, Management conducted a reevaluation of its disclosure controls and procedures and determined that changes were required to certain accounting records.  As previously described Management believes its disclosure controls and procedures were not effective.  During the Interim Period ended March 31, 2005 the Company made no changes to its internal control procedures, other than as identified in the next two paragraphs.

                Anticipated Changes to internal controls over financial reporting and to disclosure controls and procedures to prevent future misstatements of a similar nature:  As a result of the events that caused the restatement, the CFO and CEO have taken certain immediate steps to mitigate and prevent future misstatements from occurring in the future.  These steps include, (i) notification of the events causing the restatement to the Board of Directors at the Board's meeting of September 20, 2005, (ii) presentation of recommendations to the Board to strengthen the Company's controls and procedures, with such recommendations adopted by the board at the stated meeting, (iii) appointing new disclosure committee members, audit committee members and disseminating disclosure controls and procedures guidelines to all Board members, as well as a briefing on the duties and requirements of all Board members.   Management continues to evaluate its controls and procedures in light of the changes in its business and operations.

                (b) Changes in Internal Control Over Financial Reporting

                During the Quarter ended September 30, 2005, in order to assure appropriate control over financial reporting of expanded activities of the Company due to the acquisition of assets from Thermoplastic Composite Design, Inc., the Company increased its disclosure controls.  The additional controls include an increased meeting schedule between top executives focused on company activities; an additional level of management review of reports, the adoption of a more aggressive disclosure calendar and

                It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. 

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**PART II - OTHER INFORMATION**

**ITEM 1.   LEGAL PROCEEDINGS**

                The Company is a defendant in an action filed by Mr. Real Morel in the Supreme Court of British Columbia, Canada under which the Company was served in May 2000.  Mr. Morel alleges non-payment by the Company of amounts due pursuant to demand promissory notes made by the Company to Mr. Morel during 1998.  The amount claimed is approximately $69,600 including interest.  After consultation with British Columbia legal counsel and a review of the circumstances surrounding the issuance of the notes, the Company has resolved to dispute liability and to advance a set-off and counterclaim.  Management of the Company believes that the outcome will not have a material adverse effect on the financial position of the Company.  Since the fiscal year ended December 31, 2003, no further action has been taken with respect to this matter, by either the Company or Mr. Morel.

                The Company was a defendant along with others, including Steve Pappas, a Director of the Company, in a proceeding filed in the Superior Court of Cumberland County, Maine by former employees of Sports Quest of New England LLC, for back wages and penalties.  The Company denied all liability, ownership or other involvement with Sport Quest LLC.  The Company entered into a settlement agreement with the Plaintiffs in the case which has been fully executed.  The result was not material to the Company.

                The Company has filed a Declaratory Judgment action in U.S. District Court for the Southern District of New York against Steve Pappas, a director of the Company. Envirokare is asking that the Voting Trust and Trust Agreement signed by Mr. Pappas on August 7, 2003 be declared valid and in full force and effect until August 7, 2006.  Mr. Pappas had previously made a demand of the Trustee and the Company to terminate this trust.  The demand was rejected.   Management expects to resolve this matter in a manner favorable to the Company.   Regardless of outcome, management does not believe that this litigation will have any material effect on results of its operations.  The docket number of this action is 1:05cv-05515-LAK.

**ITEM 2. CHANGES IN SECURITIES**

              During the nine months ended September 30, 2005, the Company issued 62,500 shares of its common stock when warrants were exercised at $0.40 per share for a total of $25,000 and 50,000 shares were issued when stock options were exercised at $0.30 per share for a total of $15,000.  In addition, the Company issued 614,465 shares of its common stock when options were exercised by a former Company executive at $0.23 per share, with payment set off against severance owing to the former executive.  During the period ended September 30, 2005, the Company issued 2,600,000 shares of its common stock when stock warrants were exercised at prices ranging between $0.25 and $0.40 per share.  During the period ended September 30, 2005 the Company issued 826,087 shares of its common stock when stock options were exercised at a price of $0.23 per share.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

                None

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

                None

**ITEM 5. OTHER INFORMATION**

                None

**ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K**

                (a) Exhibits**                               ** None                       (b) Reports on Form 8-K

                               A report on Form 8-K regarding Item3 was filed by the Company on January 18, 2005.                                     A report on Form 8-K regarding Item 1 was filed by the Company on March 10, 2005.                                     A report on Form 8-K regarding Item 5 was filed by the Company on March 24, 2005.                                     A report on Form 8-K regarding Item 7 was filed by the Company on March 29, 2005.

              

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 **SIGNATURES**

                In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 5, 2006.         
| Registrant:               |   |  ENVIROKARE TECH, INC.                                                  |
|--------------------------------|--------|------------------------------------------------------------------------------|
|                           |   |                                                                              |
|                           |   |                                                                         |
| By:                            |   |  /s/ Nicholas Pappas                                                    |
|                           |   |                                                                              |
| Name:             Title:  |   |  Nicholas Pappas             Chairman and CEO                           |
|                           |   |                                                                         |
| By:                            |   |  /s/ George Kazantzis                                                   |
|                           |   |                                                                              |
| Name:             Title:  |   |  George Kazantzis             President and Principal Financial Officer |